How should overtime pay be handled on payroll?

Handling Overtime Pay on Payroll in Wisconsin

In Wisconsin, managing overtime pay on payroll requires adherence to both federal and state regulations to ensure compliance and accurate employee compensation.

Overtime Pay Requirements

• Overtime rate: Wisconsin follows the federal Fair Labor Standards Act (FLSA) rules, which require paying non-exempt employees at least 1.5 times their regular hourly rate for hours worked over 40 in a workweek.
• Workweek definition: The workweek is a fixed, recurring seven-day period established by the employer. Overtime is calculated based on hours worked within this period.
• Exempt vs. non-exempt employees: Ensure proper classification of employees. Exempt employees (e.g., certain salaried professionals) are not entitled to overtime, while non-exempt employees must receive overtime pay.

Operational Steps for Payroll Processing

• Track hours accurately: Use reliable timekeeping systems to capture total hours worked each week, including overtime.
• Calculate overtime pay: Multiply the employee’s regular hourly rate by 1.5 for each hour over 40 worked in the workweek.
• Integrate with payroll software: Configure payroll systems to automatically identify overtime hours and apply the correct pay rate.
• Recordkeeping: Maintain detailed records of hours worked and overtime payments for at least three years to comply with federal and state requirements.
• Payroll taxes: Include overtime wages in taxable income for Social Security, Medicare, federal and state income tax withholding, and unemployment insurance calculations.

Additional Considerations

• State-specific rules: Wisconsin does not have overtime laws that differ from federal standards, but always verify updates as of 2026.
• Employee classification review: Regularly audit employee status to avoid misclassification that can lead to overtime pay violations.
• Automation: Implement payroll automation to reduce errors in overtime calculations and improve compliance.
• Communication: Clearly inform employees about overtime policies and pay practices as part of onboarding and ongoing operations.